CYPRUS & THE EU: CHAOS & COLLAPSE – Andy Hoffman
Burning senior bond holders could create contagion again in European debt markets and now in addition to that bureaucrats have managed to make depositors in periphery nations nervous about their deposits in banks. This could precipitate bank runs in Greece, Spain and Italy with obvious negative ramifications for the entire EU banking and financial system.
Cyprus is a little domino which has fallen and may knock the larger more important dominos of Spain and Italy thereby creating contagion in the Eurozone. Especially as the political backlash against the EU and Troika is likely to be substantial and could lead to more power being gained by parties and movements that advocate leaving the European Monetary Union and indeed the European Union.
Several analysts remain wary pact will contain euro-area stresses
NEW YORK (MarketWatch) — The euro dropped below $1.30 on Monday, giving up gains scored in Asian trade following news that Cyprus reached a bailout agreement with its international lenders.
“This deal calls into question the safety of bank deposits, as the next time one of these countries asks the European Central Bank for funding, the bank could come back and tap them on the shoulder with a similar deal Cyprus has now agreed to,” said Evan Lucas, a strategist at IG Markets.
“Risk premiums will increase on this deal, as will market fragmentation [...] this Band-Aid deal will have ramifications,” he added.
European Bank Runs Could Spread Like Wildfire Due to Cyprus Banks-Laurence Kotlikoff
After marathon and heated discussions, agreement was reached on a new rescue package for Cyprus. Compared to what had emerged a week earlier, this is a better technical outcome — both in what it contains and in what is left out.
Yet implementation will be very challenging, especially as Europe is yet to find an answer to the most important question of all: how to improve growth and employment prospects in a significant and sustainable manner.
After a badly botched attempt, Cyprus and its “Troika” of supporters (European Commission, European Central Bank and the International Monetary Fund) agreed last night on a technically more robust rescue program which would unlock some EUR 10 billion in external support. If implemented fully, Cyprus would thus avoid an immediate financial collapse. But its economy, nevertheless, faces significant economic contraction and tremendous social costs.
DOW JUST TURN TO RED
RUSSIA SAYS LOAN TERMS SOUGHT BY CYPRUS AMOUNT TO 10% WRITEDOWN
Business Insider‏@businessinsider2 min
Italy Is Starting To Get Slammed Now — Spain Turns Red, US Markets Fading
Italy is getting slammed now. It’s down 1.55%.
EURO STILL TANKING:
EURO ZONE COUNTRIES WITH LARGE BANKING SECTORS MUST LOOK TO RESTRUCTURE, REDUCE OVERALL SIZE – DIJSSELBLOEM